Japan stocks 'likely to top other assets' in 2nd half

TOKYO • Japanese equities may be the only asset class in the world to deliver better returns in the second half of the year than in the first, according to JPMorgan Chase & Co.

While most asset classes will probably provide only low single-digit returns for the rest of this year, Japan's Topix index may return 6.6 per cent, about double its 3.8 per cent gain in the six months to end-June, analysts led by Ms Joyce Chang, the bank's global head of research, wrote in a note on Monday, comparing estimated returns for global stocks, bonds, currencies and commodities.

Global stocks rallied on Monday after US President Donald Trump and his Chinese counterpart Xi Jinping agreed to revive talks in their trade row.

However, the analysts said, returns will probably be muted in the second half of this year as the world's economies slip into sub-trend growth and as valuations remain high.

Japan may play catch-up after lagging behind other markets earlier in the year and with global funds relatively underweight on the country's assets, according to the analysts, who also cited Topix valuations as a reason for the market's attractiveness. The Japanese index trades at less than 1.2 times book value, compared with about 3.5 times for the S&P 500 Index.

The analysts also said they continue to prefer US equities over European stocks because of better earnings momentum in the world's largest single market, and the popularity of stock buybacks among US corporations.

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A version of this article appeared in the print edition of The Straits Times on July 03, 2019, with the headline 'Japan stocks 'likely to top other assets' in 2nd half'. Print Edition | Subscribe